OPINION: Change in US Energy-Export Policies Would Hit Moscow in the Pocketbook

Russia’s ongoing aggression in Ukraine is fueled by an energy trade war in which the United States, regrettably, is an absent actor.

But now the Obama administration has an option to put a giant roadblock in Moscow’s way without firing a shot. How? By embracing abundant U.S. shale energy, reversing a four-decade-old ban on crude-oil exports, and providing massive energy aid and trade with Europe.

Consider this: The European Union today imports 42 percent of all its energy from the former Soviet Union. Ukraine itself acts as a transit hub linking major Russian oil and gas pipelines to Europe. Last year, Ukraine transited 86 billion cubic feet of Russian gas and 15.6 million tons of oil. That’s roughly half of all Russian gas exports and 7 percent of its petroleum exports.

But Ukraine hasn’t received any Russian gas since June 16, when state-owned Gazprom cut supplies in retaliation for alleged unpaid gas bills.

In turn, the EU has imposed sanctions blocking Russian state-owned banks and oil companies from seeking financing in European capital markets. Europe is also blocking the export of deep-water technology to Russia’s oil company Rosneft and its pipeline monopoly, Transneft. Clearly, the objective is to hit Moscow in the pocketbook.

But what would happen if Europe stopped buying all oil and gas imports from Russia? The financial — and international — repercussions might be enormous, since Russia and Europe are close trading partners.

In fact, Europe now accounts for 84 percent of Russia’s total oil exports, and about 76 percent of its natural gas, according to the Energy Information Administration. The Russian government under Prime Minister Vladimir Putin has built up massive oil and gas infrastructure since 2000, and now counts energy-production revenue as half of its federal budget.

Do the math: If the United States announced a fast-track program to release crude exports to the EU and Ukraine, what would happen to Putin’s bluster, the balance sheets at Rosneft and Transneft, and all of Moscow’s fantasies about restoring the lost Soviet empire?

Chances are, a great deal.

Lifting the U.S. crude-oil export ban would signal a change in global energy markets and the recognition of the United States as a rebirthed energy superpower. It would show our commitment to free and fair energy trade, giving our energy-consuming allies in the EU the chance to buy in a competitive marketplace rather than remain dependent on volatile monopoly suppliers like Russia.

It’s no secret in Washington that Eastern Europe has been lobbying Congress for years to change its energy-export policies. In July, the Washington Post leaked a secret document showing that the European Union is pressing the United States to lift its ban on crude-oil exports as part of a “sweeping trade and investment deal” that could equal $4.7 trillion if completed.

Meanwhile, U.S. energy officials are resorting to pre-election double-speak to avoid direct answers about our energy-export future.

While in Ottawa last month to sign a bilateral cooperation agreement with Canadian Natural Resource Minister Greg Rickford, U.S. Energy Secretary Ernest Moniz claimed that, in the short term, the United States has no surplus of oil to export abroad.

“The fact is, we are — and will remain for some time — a very major importer of oil,” he said.

Moniz failed to mention that the United States is sitting on top of such a geyser of shale energy, with abundant oil and gas reserves forecast for decades on, that the industry is likely to falter — if not shut down — if the U.S. government fails to open up international export channels.

In 2013, for the first time since 1996, the United States produced more oil than it imported. According to BP World Outlook, a respected economic survey, the United States will become a net energy exporter by 2018. In this interim period, U.S. and EU energy-producing partners can deliver supplies to Ukraine as a stopgap. The U.S. Strategic Petroleum Reserve can be tapped, as it was earlier in the Ukrainian conflict. Even oil from Iran is an option, provided sanctions are lifted.

Bottom line: We need to seize the moment and lift the crude-export ban now. Even with predictable delays of implementation and supply, a fast-track crude-export program would provide a powerful tool to the EU and Ukraine to counter Russian aggression. It would bolster our domestic economy, help stabilize or lower world energy prices, and deliver to our allies the most vital commodities of all: optimism and the continued will to fight.

———

Tom Ridge was the first U.S. Secretary of Homeland Security, and is a former Republican governor of Pennsylvania.

Dan Eberhart is CEO of Denver-based Canary LLC, a privately owned oilfield service company.

This article appeared in print in the November 4th, 2014 edition of Hamodia.